Your pound and the Seven Brexits

If you’re planning to buy a home in the next 12 months, your pounds are balancing on a seesaw right now. Here we run through seven plausible Brexit scenarios and analyse the likely affect on the exchange rate. Don’t think this just applies to the GBP/EUR. Every GBP currency pair will be affected. What happens in Westminster next could be critical to your purchase*.

Purchasing overseas during and after Brexit

For anyone making a major transaction such as buying a property abroad in 2019, what is happening in Westminster right now is of more than passing interest. Whether it’s the fate of the Withdrawal Agreement, the mathematics of the House of Commons, the survival of Theresa May as PM, it will all affect how much your home abroad costs, or whether your income from the UK will be hit when you’re living abroad.

A week or two ago the pound was within a whisker of hitting its highest rate for 18 months, before falling nearly 3%. For anyone buying a €200,000 home, Brexit could have cost you £5,000 last week, if you had not acted to secure the rate with a forward contract.

What will be the likely affect on the pound if the following scenarios play out? All are entirely plausible. Of course, we cannot make firm predictions on the likely impact on the pound. Brexit is not happening in a vacuum, and isn’t the only game in town even within the EU. But, all things being equal, this is what is most likely to happen.

Choose a scenario from the dropdown to see outcomes

The Withdrawal Agreement is passed by the House of Commons and the EU. The transition period starts.

How likely is this? Theresa May only needs a few Labour MPs and the DUP to get her deal passed. There is also some suggestion that Labour could vote to support the deal in return for an early General Election afterwards. Alternatively, the DUP could support May to avoid a General Election!

Effect on pound: strengthening against euro and dollar.

Theresa May fails to get enough DUP or Labour MPs to agree the deal and it fails. In this instance, May could well resign. This could lead to a more “hard Brexit” (Canada+++, for example) led by a more Leave-supporting PM, such as Raab or Johnson.

Effect on pound: weakening

Although the attempt to unseat May looks to have failed at the time of writing (20 November), it could still happen. The current betting is that she is more likely to be replaced by a more hardline Leaver.

Effect on pound: weakening

If the UK does not extend Article 50 and no deal is done, the UK will leave without a deal on 30 March 2019. No-one knows exactly what will be the affect on daily life in the UK, or on the economy.

Effect on pound: weakening

Theresa May stated on the steps of Downing Street that there were three options: her deal, no deal or no Brexit. There is no guarantee that a new referendum would have a different result, but electoral demographics suggest that younger voters replacing those elderly ones who have died could swing it back to Remain.

Effect on pound: strengthening

If the deal fails, as seems likely, and there is no consensus for a second referendum, options such a “Norway for now”, membership of EFTA etc. will all be possible, even under Theresa May’s leadership.

Effect on pound: strengthening

This is the demand of the Labour Party and could be offered by May as a way out of an impasse and to avoid No Deal that no party wishes to be blamed for. It could also be offered by May to get the Deal passed if she is confident of beating Labour.

Effect on pound: weakening

Protect your budget from volatility

Of the seven scenarios, the majority lead to a weakening strength of the pound. When the UK said it would leave, the pound fell by between 10 and 20%. Could this happen again with no deal. Many financial analysts say it could, with predictions of parity against the euro, or worse.

That is why we urge readers who are serious about buying abroad, or who have moved abroad and whose income depends on a strong pound, to call their trader today.

It is still possible to lock in a good exchange rate for up to a year, on payment of a 10% deposit. It is called a forward contract. Speak to your Personal Trader to find out more on 020 7898 0541.

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